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Square (SQ) Updates Guidance Amid Coronavirus Outbreak

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Square, Inc. (SQ - Free Report) recently provided an update on first-quarter 2020 guidance.

Notably, management has revised its view for the quarter due to the rampant spread of coronavirus pandemic across the globe and announcement of lockdowns in many countries.

The company stated that although it saw 47% year-over-year growth in gross profit in the month of January and February, it witnessed slow growth in March due to effects of the COVID-19 pandemic.

In regard to this pandemic situation, Square lowered its first quarter total net revenue guidance to the range of $1.30-$1.34 billion from previous expectation of $1.34-$1.36 billion. In addition, the company revised its gross profit guidance to the range of $515-$525 million from prior projection of $550-$560 million.

Square, Inc. Price and Consensus

 

Other Notable Points

The company did not provide any other updates on the remaining financial metrics. It expects adjusted EPS to be lower than the guided range of 16-18 cents.

The company mentioned that the gross payment volume among Square sellers has further decelerated through the last week of March.

In addition, Square has withdrawn its guidance for full-year 2020 due to uncertainties related to COVID-19.

In the past 30 days, the Zacks Consensus Estimate for fiscal first-quarter earnings has moved up 21.4% to 17 cents per share. The consensus mark indicates growth of 54.6% from the year-ago figure.

Fourth Quarter at a Glance

The company reported fourth-quarter 2019 non-GAAP earnings of 23 cents per share, which beat the Zacks Consensus Estimate by 15%. Net sales of $1.31 billion (on a non-GAAP basis) beat the Zacks Consensus Estimate of $1.19 billion and came ahead of the guided range of $1.16-$1.18 billion. The top line also improved 41% from the year-ago quarter and 3.7% sequentially.

Wrapping Up

Square’s integrated payments and software platform have been gaining significant traction with small and medium sized businesses, thereby driving top-line growth. Newer add-on products and solutions — including Instant Deposit, Caviar and Capital — now represent an increasing proportion of revenues and should drive robust Subscription & Services growth.

With solid management execution, accelerating revenue growth, strong adoption of new products and improving electronic payments market, the stock should thrive in the near future.

Zacks Rank & Other Stocks to Consider

Square currently carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the broader technology sector include Stamps.com Inc. , eBay Inc. (EBAY - Free Report) and Atlassian Corp. (TEAM - Free Report) . While Stamps.com and eBay sport a Zacks Rank #1 (Strong Buy), Atlassian carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Stamps.com, Atlassian Corp. and eBay is currently projected at 15%, 22.3% and 11.3%, respectively.

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